Brazil has window of opportunity before peak demand for oil

IBP president José Firmo said in an event held last Friday that the country’s oil and gas industry should take advantage of the “window of opportunity” that will exist in the coming years to convert the oil reserves pre-salt in wealth for society.

The “window” in question refers to the time the industry will have until the next peak in demand (when the demand for oil in the world stops to grow) expected to happen between 2030 and 2050. But for that happen, the country needs to undergo a tax reform and improve the regulation of the sector.

A special guest at the event, Antoine Halff, director of the Petroleum Program at the Columbia University Energy Policy Center (Antoine Halff), said that “Brazil can be a winner in this energy transition scenario and may be one of the top five producers of oil in the world “thanks to the pre-salt, which is competitive even against American shale oil.

Halff also said that Brazil has an advantage in the quality of reserves and in the stability of rules, when compared to competitors in Latin America, such as Mexico and Venezuela, respectively.

The big question is to know when this peak in demand is going to happen. As it is a complex question, Halff believes that there are three groups of analysts: the most traditional, the newcomers and the most connected group with the environment.

The more traditional group is characterized by large oil companies such as Exxon and Chevron and, according to the professor, are more conservative and seek continuity in the industry. These companies say that the peak will still take time, probably in 2035.

Already the group of newcomers, who are averse to inertia in the industry, says that peak demand will happen in the very near future, between 2022 and 2025. Finally, “climate scientists”, as Halff identifies, is the a group that is already looking for low carbon solutions and reducing CO2 emissions.

Halff also considered that less than 25% of the oil is destined for consumption in passenger vehicles. Thus, despite uncertainties about future demand, other uses of oil and growth in energy demand from Asian countries, notably India and China, will be important factors in sustaining global oil consumption.

The other two speakers, Helder Queiroz, professor and researcher at the Energy Economics Group of UFRJ and Lavinia Hollanda, consultant and director of Scope Energy, also talked about the future of Brazil and the peak of demand.

According to Lavinia Hollanda, it is not known when this peak of demand will happen, and may be even more than a peak. What is known, according to the consultant, is that demand for oil will continue to grow until 2023 and that production can reach 5.2 million barrels of oil per day by 2026, according to IEA studies.

Brazil, being a country with 80% of production coming from ultra-deep waters, has to organize its inspection, the bureaucracy of the environmental licenses and change the regulation if it wants to compete, according to Lavinia. Because this peak in demand is a “short opportunity,” the country needs to be a competitor on a par with other producers, such as China and India.

The event was conducted by the Brazilian Institute of Petroleum, Gas and Biofuels (IBP), in partnership with the Energy Economics Group of the UFRJ Institute of Economics and Columbia Global Centers.

Source: Brazil Energy

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